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Uncertainty Reigns

Sports writers covering an upset often begin their stories with: "Then they played the game." The current version of this would be: "Then they held the election." I seldom throw away the entire draft of a column, but November 2016 is an exception. In this case, pre-election analyses and predictions were "trumped" by the actual results.

Uncertainty is now the order of day, including the economy. For example, the stock market increased nearly 2 percent when FBI Director Comey announced that newly-discovered Clinton emails contained nothing new. During the election-night, stock futures fell nearly 5 percent when Clinton's expected victory began to evaporate, suggesting that investors feared Trump. Then the next two days after the election, stocks reached an all-time high.

Uncertainty is disconcerting, but it is a double-edged sword. Clinton promised the certainty of more of the same while President-elect Trump brings upside as well as downside risks. Analyzing the new Trump economy entails addressing complicated, multifaceted questions such as: 1. What are his plans? Did he mean what he said in the campaign; 2. Will his plans actually be implemented; and 3. What will be the impact on the economy of these changes?

For example, one clear promise of Trump and the other Republican candidates was to end Obama Care, the Affordable Care Act. Ending the ACA is quite different from opposing it in the beginning. Since it is now in operation, it will require a replacement healthcare system. Drafting these reforms will be daunting as was the case for Hillary Clinton in the early 90s when she led President Clinton's reform efforts and for President Obama in his first term.

So far Trump has chosen to go it alone in regard to the economy with little advice or support from economists. Economists have been wary of his anti-trade and anti-immigration rhetoric. His challenge will be to deliver results to his constituency without hurting the economy--not an easy task. Economists are also concerned about his suggestion of reducing the Federal Reserves' autonomy. While the Fed's efforts may not satisfy everyone, few if any experts would like to give the country's monetary policy directly to the Congress and president. He has also promised large tax cuts with no clear with to pay for them without much larger deficits. On the positive side, at least for conservative economists, Trump will likely retard the growth of regulations. He has also promised large tax cuts with no means of paying for them aside from increased deficits.

The electorate has clearly chosen change, but with change comes added risk and uncertainty. This is a price many unhappy voters seem willing to pay. Just after the election, those on the losing side were shocked and concerned about the future. Trump's challenge will be not just to deal with these people, but also his supporters. Their expectations have been raised beyond any reasonable ability to deliver on his promises. Millions of manufacturing jobs will be returning regardless of new policies and immigrant issues will not go away. In the long run, Trump's supporters may prove more difficult than his detractors. The desire to set a new course is clear, but the results are uncertain.